Marx on Capitol: Election May Usher In More Regulatory Oversight

Except for Newt Gingrich’s two mischaracterizations, credit unions haven’t come up as an issue in this election campaign so far.

That doesn’t mean, however, that the folks at NCUA headquarters aren’t keenly interested in the outcome.

As well they should be.

For starters, the person elected president in November will have the opportunity to appoint two, possibly three, members to the NCUA board.

NCUA Chairman Debbie Matz’s term expires in 2015 and Board Member Michael Fryzel’s term ends next year. In addition, if Carla Decker (or someone else) isn’t confirmed this year to the board to succeed Gigi Hyland, the man inaugurated as president next January will get to nominate all three board members.

Because Congress required that the board have at least one member from each party, there will be a two to one partisan breakdown on the board. We just don’t know which party will have two seats and which will have one.

In addition, the president has the right to designate the chairman. A re-elected Obama would presumably keep Matz in that post. She supported him in 2008, unlike Hyland, the board’s other Democrat, who backed Hillary Clinton. In November, Matz contributed $2,000 to Obama’s re-election campaign.

If a Republican wins, he could put Fryzel in the chairmanship again for his remaining months on the board. Under that scenario, Fryzel would be succeeded by another Republican.

Beyond the personnel shifts, as important as they are, the election could dramatically shift the messages and mandates that the agency receives from Capitol Hill.

To be sure, the NCUA is an independent and self-funding agency that doesn’t have to go hat in hand to Congress for its spending money. But Congress can make the agency’s life difficult in many other ways.

The House Financial Services Committee recently held a hearing on a bill to give financial institutions more options to appeal their examination results. NCUA Executive Director David Marquis and the other senior officials at bank regulators strongly opposed the measure.

The bill would allow financial institutions to appeal their exam results to an administrative law judge and mandate that federal bank examiners provide greater documentation of their findings.

Lawmakers of both parties used the hearing to vent about what they see as the excesses and arrogance of regulators. Look for even more of those kinds of hearings, and the not-so-subtle message they send to the NCUA and other agencies, down the road.

That doesn’t mean the bill is likely to become law soon.

Even if the GOP-controlled House passes the measure, it’s likely to die in the Senate, where the Democrats hold the majority. So far, no senator has even sponsored a companion measure and curbing bank regulations hasn’t been a priority of the Senate Banking Committee.

Things could be different next year if the Republicans keep the House and win control of the Senate.

A GOP-controlled Senate, with a Banking Committee chaired by Sen. Richard Shelby (R-Ala.) would be more likely to give such a bill at least a hearing. Shelby is quite skeptical of what he sees as excessive regulation and might well use such a session to let fellow senators vent on behalf of their constituents and make regulators squirm a bit.

However, if such a measure ever made it to the Senate floor, you might not want to bet a lot of money on the outcome.

The Senate remains unpredictable, regardless of which party has a majority. For starters, essentially 60 votes are needed to pass any measure because of the chamber’s rules, including the filibuster. Even the most optimistic GOP strategists don’t think they will have 60 seats next year.

If the exam bill passes, Obama might well decide to pull out his veto pen. Even though he has recently issued several executive orders ordering government agencies to scale back some regulations, if he is re-elected he may have less incentive to continue that policy.

The nation’s political landscape next year is, as former Defense Secretary Donald Rumsfeld might have put it, a “known unknown.” Before making any long-term predictions about the fate of credit union legislation and regulation, the best advice is to hurry up and wait.